Rising Carbon Dioxide Sales Can't Save Sodastream International Ltd.'s Earnings

Investors were bracing for a rough second-quarter report out of Sodastream -- and the company provided just that Wednesday morning. The maker of at-home carbonated water machines announced that global sales dropped by 28% in the most recent quarter as operating income tanked by 83%.

Here's a big-picture look at how the results held up against Wall Street's targets:

*Expected is the average forecast of the nine analysts who cover the stock. Source: Yahoo! Finance and Sodastream's financial filing.

Sales go flat Sodastream reported bad news on the sales front almost across the board. Revenue shrunk by double-digits in each of its geographic markets, led by a 44% fall in the U.S. region. Western Europe, with its 16% decline, was the best-performing Sodastream market this quarter thanks to consumers in Germany, Switzerland, and Austria bucking the global trend by purchasing more at-home water carbonation gear.

Management pointed to foreign currency swings as the main reason for the global sales shortfall, but exchange rate moves only explain $17 million of the $40 million drop. The far bigger driver was lower sales of the company's soda machines, flavors, and starter kits. In fact, the only Sodastream product that logged a sales improvement was carbon dioxide canisters:

Source: Sodastream financial filling

The carbon dioxide growth is good news because it shows that customers are still using their carbonation machines at home, even if fewer new machines are finding their way into shopping carts. Sodastream now counts a customer base of 6.9 million carbon dioxide purchasers, up from 6.5 million a year ago.

Strategic outlookMeanwhile, demand might be slipping for many of Sodastream's products, but the sales drop was accelerated by management's strategic decision to pull back on advertising and reduce its retailing footprint in preparation for a brand relaunch in the second half of the year.

Source: Sodastream.

Sodastream is shifting its emphasis away from soda and toward a sparkling water focus, which management hopes will return the company to sales growth. "As we previously discussed, the first half of 2015 would be a challenging period due to implementation of our global restructuring and growth plan combined with changes in foreign currency exchange rates," CEO Daniel Birnbaum said in a press release.

Management is optimistic that a rebound is on the way. Sodastream is making "tremendous progress toward repositioning as a water brand behind a health and wellness positioning," according to Birnbaum.

Investors won't have to wait much longer for the results of this brand relaunch: Sodastream is now in the process of rolling out its new line of sparkling water flavors to retailers while putting the final touches on a marketing campaign aimed at reintroducing shoppers to its products.

The article Rising Carbon Dioxide Sales Can't Save Sodastream International Ltd.'s Earnings originally appeared on Fool.com.

Demitrios Kalogeropoulos owns shares of SodaStream. The Motley Fool owns shares of SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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